Form 8-K Global Eagle Entertainme For: May 09
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UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
May 9, 2016
____________________
GLOBAL EAGLE ENTERTAINMENT INC.
(Exact name of registrant as specified in
its charter)
____________________
| Delaware | 001-35176 | 27-4757800 |
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
4553 Glencoe Avenue, Los Angeles, California 90292
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: 310-437-6000
Not Applicable
(Former name or former address, if changed since last report)
___________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On May 9, 2016, Global Eagle Entertainment Inc. (“we” or the “Company”) issued a press release (the “Earnings Press Release”) announcing results for the quarter ended March 31, 2016. We have furnished herewith as Exhibit 99.1 a copy of the Earnings Press Release.
Item 7.01 Regulation FD Disclosure.
On May 9, 2016, the Company also issued a press release (the “EMC Acquisition Press Release”) announcing the Company’s entry into an agreement (the “EMC Acquisition Agreement”) to acquire Emerging Markets Communications (“EMC”) from ABRY Partners VII, L.P. We have furnished herewith as Exhibit 99.2 a copy of the EMC Acquisition Press Release. We will file the information required by Item 1.01 in respect of the EMC Acquisition Agreement in a separate Current Report on Form 8-K.
On May 9, 2016 at 8:00 a.m. Eastern time, as previously announced, the Company will host a conference call relating to its results for the quarter ended March 31, 2016. The Company will now also discuss the EMC acquisition on that call.
We have furnished herewith as Exhibit 99.3 a copy of the presentation that the Company will reference on that call, which presentation relates to both the Company’s results for the quarter ended March 31, 2016 and the EMC acquisition (the “Presentation”).
Exhibits 99.1, 99.2 and 99.3 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 99.1 | Earnings Press Release, dated May 9, 2016. | |
| 99.2 | EMC Acquisition Press Release, dated May 9, 2016. | |
| 99.3 | Presentation. |
Forward-Looking Statements
We make forward-looking statements in this Current Report on Form 8-K and in the Exhibits attached hereto within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including, without limitation, the pending acquisition of EMC and the timing of the closing thereof, our ability to successfully integrate EMC and achieve synergies therefrom, the expected performance of the combined GEE-EMC business, EMC’s projected revenue and Adjusted EBITDA, our earnings, Adjusted EBITDA, revenues, expenses, capital expenditures, aircraft connectivity installations or other future financial or business performance or strategies, or the impact of legal or regulatory matters on our business, results of operations or financial condition. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions. These forward-looking statements are based on information available to us as of the date they were made, and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include: our ability to integrate our acquired businesses, the ability of the combined business to grow, including through acquisitions which we are able to successfully integrate, and the ability of our executive officers to manage growth profitably; the ability of our customer Southwest Airlines to maintain a sponsor for its “TV Flies Free” offering and our ability to replicate this model through other sponsorship alliances; the outcome of any legal proceedings pending or that may be instituted against us, our subsidiaries, or third parties to whom we owe indemnification obligations; changes in laws or regulations that apply to us or our industry; our ability to recognize and timely implement future technologies in the satellite connectivity space, including GSM and Ka-band system development and deployment; our ability to capitalize on investments in developing our service offerings, including our long-term project with QEST to develop global antenna technologies; significant product development expenses associated with our long-term line-fit initiatives; our ability to deliver end-to-end network performance sufficient to meet increasing airline customer and passenger demand; our ability to obtain regulatory approval on a timely basis for the use of our equipment on aircraft; our ability to obtain and maintain international authorizations to operate our service over the airspace of foreign jurisdictions our customers utilize; our ability to expand our service offerings and deliver on our service roadmap; our ability to timely and cost-effectively identify and license television and media content that passengers will purchase; a decrease in the media content onboard IFE systems and/or the discontinuance of the use of IFE systems indefinitely due to the emergence and increase in the use of hand-held personal devices by airline passengers; general economic and technological circumstances in the satellite transponder market, including access to transponder space in capacity limited regions and successful launch of replacement transponder capacity where applicable; our ability to obtain and maintain licenses for content used on legacy installed IFE systems; the loss of, or failure to realize benefits from, agreements with our airline partners; the loss of relationships with original equipment manufacturers or dealers; unfavorable economic conditions in the airline industry and economy as a whole; our ability to expand our domestic or international operations, including our ability to grow our business with current and potential future airline partners or successfully partner with satellite service providers, including Hughes Network Systems and SES; our reliance on third-party satellite service providers and equipment and other suppliers, including single source providers and suppliers; the effects of service interruptions or delays, technology failures, material defects or errors in our software, damage to our equipment or geopolitical restrictions; the result of ongoing tax audit that could result in reduction of tax carryforwards; the limited operating history of our connectivity and in-flight television and media products; costs associated with defending pending or future intellectual property infringement actions and other litigation or claims; increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with the roll out of our technology roadmap or our international plan of expansion; fluctuation in our operating results; the demand for in-flight broadband Internet access services and market acceptance for our products and services; our ability to generate sufficient cash flow to make payments on our indebtedness; our incurrence of additional indebtedness in the future; our ability to repay the convertible notes at maturing or to repurchase the convertible nets upon a fundamental chance or at specific repurchase dates; the effect of the conditional conversion feature of the convertible notes; our compliance with the covenants in our Credit Agreement; our ability to obtain necessary regulatory approvals or to satisfy any of the other conditions to the EMC transaction on a timely basis or at all; a delay in the expected closing date of the EMC transaction; a failure to close the EMC transaction on the terms negotiated; any delay or inability of the combined company to realize the expected benefits and synergies of the transaction; our assumption of EMC’s outstanding indebtedness and the costs relating thereto; our issuance of stock to consummate the EMC transaction and the dilution to our existing stockholders relating thereto; the loss of management and other key employees; substantial non-recurring transaction, regulatory and integration costs and/or unknown liabilities; sales of our stock in the future by shareholders of EMC, which will hold a substantial portion of our outstanding securities, and the resulting effect on the price of our common stock; the risk that disruptions from the proposed transaction will harm our or EMC’s business, including customer retention risk; competitive responses to the proposed EMC transaction; our ability to effectively protect EMC’s intellectual property rights; the execution and compliance costs relating to new regulatory and compliance frameworks, new market risks and operations in new geographies; and general economic and business conditions that affect the combined company following the transaction. A detailed discussion of risks related to GEE’s business is included in the section entitled “Risk Factors” and other risks and uncertainties set forth in our most recent Annual Report on Form 10-K and subsequently filed reports on Form 10-Q. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and the Company and EMC undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
Global Eagle Entertainment Inc.
| ||
| By: | /s/ Michael Zemetra | |
| Name: Michael Zemetra | ||
| Title: Chief Financial Officer and Treasurer | ||
Dated: May 9, 2016
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Earnings Press Release, dated May 9, 2016. | |
| 99.2 | EMC Acquisition Press Release, dated May 9, 2016. | |
| 99.3 | Presentation. |
Exhibit 99.1
 | GLOBAL EAGLE ENTERTAINMENT |
GLOBAL EAGLE ANNOUNCES STRONG FIRST QUARTER 2016 RESULTS
| • | Strong execution delivers record revenue of $114 million; Adjusted EBITDA* grows 26% year-over-year |
| • | Entered into agreement to acquire Emerging Markets Communications (“EMC”) (see separate press release GEE-EMC.mobi ) |
| • | Two major Content customer wins in Q1; already secured over 95% of Content revenue up for renewal in 2016 |
| • | Launched fully integrated content and connectivity offering on flydubai |
| • | Expanded Connectivity systems offering to include Airconnect Global™ Ka-band solution |
| • | Introduced Entice, a ground-breaking wireless solution for inflight entertainment |
| • | Won 9 new customers for operations solutions products |
LOS ANGELES, CA, May 9, 2016 - Global Eagle Entertainment Inc. (Nasdaq: ENT) (“Global Eagle”, “GEE” or the “Company”), a worldwide provider of media content, connectivity systems and operations solutions to the travel industry, today announced financial results for its first quarter ended March 31, 2016.
GEE achieved record high revenue of $113.8 million in Q1 2016, up 13% year-over-year, driven by Content Services growth of 17% to $83.6 million and Connectivity services revenue growth of 9% to $24.2 million. GEE reported Q1 2016 contribution margin of 33%, up 2 percentage points from 31% in Q1 2015. In addition, the Company recorded Adjusted EBITDA* of $10.3 million, up 26% from $8.2 million in Q1 2015. The net loss in Q1 2016 was $2.4 million versus a $3.4 million net loss in Q1 2015.
Earlier today, GEE announced a transformative agreement to acquire EMC, a leader in network services for maritime and mobility, for $550 million. Details of the transaction are available at www.GEE-EMC.mobi.
“We’re very pleased with our results, including record revenue and numerous wins and renewals for both Content and Connectivity,” said Dave Davis, CEO of GEE. “We recently added an as yet to be identified major customer for Content Services, renewed a five-year Content contract with a top ten customer, and achieved a 100% Content renewal rate year-to-date. In addition, we launched our fully integrated media and connectivity services offering on flydubai and signed Jet Airways to a connectivity agreement.”
| GLOBAL EAGLE ENTERTAINMENT |
“Importantly, we’re excited to have announced today our agreement to acquire EMC,” continued Davis. “This transformative transaction positions GEE as a leading provider of satellite-based communications and media content to rapidly growing mobility markets.”
First Quarter 2016 Results Summary
The table below presents financial results for the three months ended March 31, 2016 and 2015.
Global Eagle Entertainment Inc.
Financial Summary
(In millions, except per share amounts)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Revenue: | ||||||||
| Content | $ | 83.6 | $ | 71.7 | ||||
| Connectivity | 30.2 | 28.6 | ||||||
| Total Revenues | $ | 113.8 | $ | 100.3 | ||||
| Adjusted EBITDA* | $ | 10.3 | $ | 8.2 | ||||
| Net loss | $ | (2.4 | ) | $ | (3.4 | ) | ||
| Loss per share - basic | $ | (0.03 | ) | $ | (0.04 | ) | ||
| Loss per share - diluted | $ | (0.03 | ) | $ | (0.06 | ) | ||
Year-over-year Adjusted EBITDA increased due to growth in higher margin Content services revenue as a result of better content purchasing efforts and cost improvements realized from past integration efforts, partially offset by higher legal fees in the period.
Capital expenditures for Q1 2016 totaled approximately $8.5 million, inclusive of $4.9 million for satellite transponder purchases that was paid in Q2 2016. The Company finished Q1 2016 with approximately $219.1 million in cash and $82.5 million in convertible debt (inclusive of $12.3 million of debt classified as equity).
| GLOBAL EAGLE ENTERTAINMENT |
Segment Results
Content solutions segment revenue grew by $11.9 million, or 17%, to $83.6 million in Q1 2016 versus $71.7 million in Q1 2015. The growth was driven by increased licensing and advertising revenue from new and existing customers, and to a lesser extent from recent acquisitions. Content segment contribution margin improved to 33% in Q1 2016 versus 30% in Q1 2015, largely due to improved content purchasing and lower amortization expense from content rights we previously acquired. In addition, successful realization of integration synergies and operational improvements are driving improved contribution margins as the volume of content increases.
Connectivity segment revenue increased by $1.6 million, or 5%, to $30.2 million in Q1 2016 versus $28.7 million in Q1 2015. This was driven by a $2.0 million increase in Connectivity services revenue, offset by $0.4 million decrease in Connectivity services equipment revenue. The increase in Connectivity services revenue was driven by an increase in the average number of connected planes and higher take rates of our Wi-Fi Internet services, partially offset by a modest decrease in sponsorship revenue. The decrease in Connectivity equipment revenue was largely due to the timing of equipment shipments on newly commissioned planes, positively offset by new Electronic Flight Bag (EFB) equipment sales. Connectivity segment contribution margin declined by 2 percentage points to 30% in Q1 2016 versus Q1 2015 due primarily to the timing of adding fixed bandwidth purchases in new regions and secondarily due to a modest decrease in sponsorship revenue.
News Highlights
| • | Announced plans to acquire Emerging Markets Communications (“EMC”) for $550 million [see separate press release GEE-EMC.Mobi] |
| • | Signed exclusive agreement with RTL International to serve TV aboard cruise ships, independent of the acquisition |
| • | Record quarterly revenue for Content Solutions |
| • | Major international airline customer win |
| • | Renewal of top 10 customer to a 5-year contract |
| • | Already secured 95+% of Content revenue up for renewal in 2016 |
| GLOBAL EAGLE ENTERTAINMENT |
| • | Fully integrated content and connectivity offering launched on flydubai |
| • | First customer to utilize GEE’s seatback Content, Connectivity, Digital Media and Operations Solutions offering on its fleet |
| • | Seatback content, in an industry first, will be delivered via satellite connectivity |
| • | Launched Entice, GEE’s game-changing platform for wireless inflight entertainment (IFE) on passenger devices |
| • | Provides upward of 10,000 hours of media content |
| • | New option for airlines that previously did not offer IFE services |
| • | Introduced GEE’s Ka-band connectivity services to North America |
| • | Announced development of GEE’s new Airconnect Global™ Ka-band high-speed antenna |
| • | Airconnect Ka and Ku antenna systems share common platform, offering airlines full installation flexibility |
| • | Air China and GEE have received all of the necessary licenses to offer satellite connectivity aboard Air China aircraft; trial is expected to commence shortly |
| • | Received STC for the Boeing 767, adding to GEE’s STC portfolio |
| • | GEE continues to expect that it will achieve over 100 installs for 2016 |
| • | Q1 2016 installs include 14 new Airconnect systems, as approximately 15 aircraft previously scheduled to be installed in Q1 were rescheduled for later in 2016 |
| • | Pay with Amazon launched on Southwest Airlines to enable convenient inflight movie and Wi-Fi purchases |
| • | Won 9 new customers for operations solutions products |
| • | Announced $50 million share repurchase program; over $5 million repurchased to date |
Business Outlook**
The Company reiterates its prior guidance for the fiscal year ending December 31, 2016 as follows:
| • | Revenue of $470-490 million |
| • | Adjusted EBITDA of $57-65 million |
| • | Capital expenditures in the range of $25-30 million |
| • | GEE expects installations of its Airconnect connectivity system in 2016 to significantly exceed installations in 2015; installation backlog is approximately 200 aircraft |
** This guidance does not take into account the pending acquisition of EMC. Please see the separate press release issued today for guidance for 2016 that takes the potential EMC acquisition into account (see separate press release GEE-EMC.Mobi).
| GLOBAL EAGLE ENTERTAINMENT |
Webcast
Global Eagle will host a webcast to discuss its first quarter 2016 results on Monday, May 9, 2016 at 8:00 a.m. ET (5:00 a.m. PT). The webcast will be available on the investor relations portion of the Company’s Web site located at http://investors.geemedia.com/events.cfm. If you cannot listen to the webcast at its scheduled time, there will be a webcast replay archived on the Global Eagle website for 30 days.
About Global Eagle
Global Eagle Entertainment Inc. (Nasdaq: ENT) is a worldwide provider of aircraft connectivity solutions to the travel industry. Through the industry’s most comprehensive product and services platform, Global Eagle Entertainment provides airlines with a wide range of in-flight solutions. These include Wi-Fi, movies, television, music, interactive software, as well as portable IFE solutions, content management services, e-commerce solutions and original content development. Serving more than 200 airlines worldwide, Global Eagle Entertainment delivers exceptional quality and value to its customers to help them achieve their passenger experience objectives. The company’s headquarters are located in Los Angeles, California, with offices and teams located in North America, Asia, the Middle East, Europe, Africa, Oceania and South America. Find out more at www.geemedia.com
Contact:
Kevin Trosian
Senior Vice President, Corporate Development and Investor Relations
+1 310-740-8624
| GLOBAL EAGLE ENTERTAINMENT |
* About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles, or GAAP, we present Adjusted EBITDA, which is a non-GAAP financial measure, as a measure of our performance. The presentation of Adjusted EBITDA is not intended to be considered in isolation from, or as a substitute for, or superior to, net income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of our cash flows or liquidity. For more information on this non-GAAP financial measure, please see the table entitled “Reconciliation of Non-GAAP Measure to GAAP Measure” at the end of this release.
Adjusted EBITDA is one of the primary measures used by our management and board of directors to understand and evaluate our financial performance and operating trends, including period to period comparisons, to prepare and approve our annual budget and to develop short and long term operational plans. Additionally, Adjusted EBITDA is one of the primary measures used by the compensation committee of our board of directors to establish the funding targets for our annual bonus pool for our employees and executives. We believe our presentation of Adjusted EBITDA is useful to investors both because it allows for greater transparency with respect to key metrics used by management in its financial and operational decision-making and our management frequently uses it in discussions with investors, commercial bankers, securities analysts and other users of our financial statements.
We define Adjusted EBITDA as net income (loss) attributable to common stockholders before, when applicable, net income (loss) attributable to non-controlling interests, income tax expense (benefit), other (income) expense, depreciation and amortization, as further adjusted to eliminate the impact of, when applicable, stock-based compensation, acquisition and realignment costs, restructuring charges, foreign exchange gain (loss) on intercompany loans and any gains or losses on certain asset sales or dispositions. Other income (expense), acquisition and realignment costs and restructuring charges include such items, when applicable, as (a) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (b) legal, accounting and other professional fees directly attributable to acquisition activity, (c) employee severance payments and third party professional fees directly attributable to acquisition or corporate realignment activities, (d) certain non-recurring expenses associated with our expansion into China that did not generate associated revenue in 2014, (e) legal settlements or reserves for legal settlements in the period that pertain to historical matters that existed at acquired companies prior to their purchase date, (f)non-cash impairment charge of a portion of certain receivables directly attributable to a customer undergoing economic hardships from trade sanctions imposed by the European Union and the United States on Russia in 2014, (g) changes in the fair value of our derivative financial instruments, (h) interest expense associated with our debt and (i) any restructuring charges in the period pursuant to our integration plan announced on September 23, 2014. Management does not consider these costs to be indicative of our core operating results.
With respect to projected full year 2016 Adjusted EBITDA, a quantitative reconciliation is not available without unreasonable efforts, and we are unable to address the probable significance of the unavailable information.
| GLOBAL EAGLE ENTERTAINMENT |
Cautionary Note Concerning Forward-Looking Statements
We make forward-looking statements in this release within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including, without limitation, our ability to consummate the EMC transaction, our earnings, Adjusted EBITDA, revenues, expenses, capital expenditures, aircraft connectivity installations or other future financial or business performance or strategies, or the impact of legal or regulatory matters on our business, results of operations or financial condition. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions. These forward-looking statements are based on information available to us as of the date they were made, and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include: our ability to integrate our acquired businesses, the ability of our business to grow, including through acquisitions which we are able to successfully integrate, and the ability of our executive officers to manage growth profitably; the ability of our customer Southwest Airlines to maintain a sponsor for its “TV Flies Free” offering and our ability to replicate this model through other sponsorship alliances; the outcome of any legal proceedings pending or that may be instituted against us, our subsidiaries, or third parties to whom we owe indemnification obligations; changes in laws or regulations that apply to us or our industry; our ability to recognize and timely implement future technologies in the satellite connectivity space, including GSM and Ka-band system development and deployment; our ability to capitalize on investments in developing our service offerings, including our long-term project with QEST to develop global antenna technologies; significant product development expenses associated with our long-term line-fit initiatives; our ability to deliver end-to-end network performance sufficient to meet increasing airline customer and passenger demand; our ability to obtain regulatory approval on a timely basis for the use of our equipment on aircraft; our ability to obtain and maintain international authorizations to operate our service over the airspace of foreign jurisdictions our customers utilize; our ability to expand our service offerings and deliver on our service roadmap; our ability to timely and cost-effectively identify and license television and media content that passengers will purchase; a decrease in the media content onboard IFE systems and/or the discontinuance of the use of IFE systems indefinitely due to the emergence and increase in the use of hand-held personal devices by airline passengers; general economic and technological circumstances in the satellite transponder market, including access to transponder space in capacity limited regions and successful launch of replacement transponder capacity where applicable; our ability to obtain and maintain licenses for content used on legacy installed IFE systems; the loss of, or failure to realize benefits from, agreements with our airline partners; the loss of relationships with original equipment manufacturers or dealers; unfavorable economic conditions in the airline industry and economy as a whole; our ability to expand our domestic or international operations, including our ability to grow our business with current and potential future airline partners or successfully partner with satellite service providers, including Hughes Network Systems and SES; our reliance on third-party satellite service providers and equipment and other suppliers, including single source providers and suppliers; the effects of service interruptions or delays, technology failures, material defects or errors in our software, damage to our equipment or geopolitical restrictions; the result of ongoing tax audit that could result in reduction of tax carryforwards; the limited operating history of our connectivity and in-flight television and media products; costs associated with defending pending or future intellectual property infringement actions and other litigation or claims; increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with the roll out of our technology roadmap or our international plan of expansion; fluctuation in our operating results; the demand for in-flight broadband Internet access services and market acceptance for our products and services; our ability to generate sufficient cash flow to make payments on our indebtedness; our incurrence of additional indebtedness in the future; our ability to repay the convertible notes at maturing or to repurchase the convertible nets upon a fundamental chance or at specific repurchase dates; the effect of the conditional conversion feature of the convertible notes; our compliance with the covenants in our Credit Agreement; our ability to obtain necessary regulatory approvals or to satisfy any of the other conditions to the EMC transaction on a timely basis or at all; a delay in the expected closing date of the EMC transaction; a failure to close the EMC transaction on the terms negotiated; any delay or inability of the combined company to realize the expected benefits and synergies of the transaction; our assumption of EMC’s outstanding indebtedness and the costs relating thereto; our issuance of stock to consummate the EMC transaction and the dilution to our existing stockholders relating thereto; the loss of management and other key employees; substantial non-recurring transaction, regulatory and integration costs and/or unknown liabilities; sales of our stock in the future by shareholders of EMC, which will hold a substantial portion of our outstanding securities, and the resulting effect on the price of our common stock; the risk that disruptions from the proposed transaction will harm our or EMC’s business, including customer retention risk; competitive responses to the proposed EMC transaction; our ability to effectively protect EMC’s intellectual property rights; the execution and compliance costs relating to new regulatory and compliance frameworks , new market risks and operations in new geographies; and general economic and business conditions that affect the combined company following the transaction and other risks and uncertainties set forth in this release and in our most recent Annual Report on Form 10-K and subsequently filed reports on Form 10-Q.
| GLOBAL EAGLE ENTERTAINMENT |
Financial Information
The table below presents financial results for the three ended March 31, 2016 and 2015.
Global Eagle Entertainment Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Revenue | $ | 113,817 | $ | 100,305 | ||||
| Operating expenses: | ||||||||
| Cost of sales | 76,768 | 69,426 | ||||||
| Sales and marketing | 4,672 | 3,275 | ||||||
| Product development | 8,746 | 7,230 | ||||||
| General and administrative | 21,221 | 18,119 | ||||||
| Restructuring charges | — | 302 | ||||||
| Amortization of intangible assets | 7,403 | 5,983 | ||||||
| Total operating expenses | 118,810 | 104,335 | ||||||
| Loss from operations | (4,993 | ) | (4,030 | ) | ||||
| Other income (expense), net: | ||||||||
| Interest expense, net | (804 | ) | (245 | ) | ||||
| Change in fair value of financial instruments | 5,865 | 954 | ||||||
| Other income (expense), net | 680 | (796 | ) | |||||
| Income (loss) before income taxes | 748 | (4,117 | ) | |||||
| Income tax expense | 3,160 | (686 | ) | |||||
| Net loss | $ | (2,412 | ) | $ | (3,431 | ) | ||
| Net loss per share | ||||||||
| Basic | $ | (0.03 | ) | $ | (0.04 | ) | ||
| Diluted | $ | (0.02 | ) | $ | (0.06 | ) | ||
| Weighted average common shares – basic | 78,643 | 76,874 | ||||||
| Weighted average common shares – diluted | 78,643 | 78,725 | ||||||
| GLOBAL EAGLE ENTERTAINMENT |
Global Eagle Entertainment Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 219,182 | $ | 223,552 | ||||
| Accounts receivable, net | 88,594 | 93,449 | ||||||
| Content library, net | 15,692 | 12,330 | ||||||
| Inventories | 18,898 | 14,998 | ||||||
| Prepaid and other current assets | 28,124 | 27,209 | ||||||
| Property, plant and equipment, net | 44,399 | 39,066 | ||||||
| Goodwill | 93,051 | 93,796 | ||||||
| Intangible assets | 113,990 | 121,437 | ||||||
| Other non-current assets | 17,759 | 12,024 | ||||||
| Total assets | $ | 639,689 | $ | 637,861 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Accounts payable and accrued liabilities | $ | 132,024 | $ | 118,530 | ||||
| Deferred revenue | 16,155 | 16,794 | ||||||
| Derivative warrant liabilities | 18,211 | 24,076 | ||||||
| Notes payable and accrued interest | 70,525 | 70,564 | ||||||
| Deferred tax liabilities | 21,060 | 22,324 | ||||||
| Other liabilities | 29,091 | 31,812 | ||||||
| Total liabilities | 287,066 | 284,100 | ||||||
| Stockholders’ Equity: | ||||||||
| Common stock, treasury stock and additional paid-in capital | 659,409 | 658,045 | ||||||
| Subscriptions receivable | (534 | ) | (528 | ) | ||||
| Accumulated deficit | (305,869 | ) | (303,457 | ) | ||||
| Accumulated other comprehensive loss | (383 | ) | (299 | ) | ||||
| Total stockholders’ equity | 352,623 | 353,761 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 639,689 | $ | 637,861 | ||||
| GLOBAL EAGLE ENTERTAINMENT |
Reconciliation of Non-GAAP Measure to GAAP Measure
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Adjusted EBITDA: | ||||||||
| Net loss attributable to common stockholders | $ | (2,412 | ) | $ | (3,431 | ) | ||
| Income tax expense (benefit) | 3,160 | (686 | ) | |||||
| Other (income) expense (1) | (5,741 | ) | 87 | |||||
| Depreciation and amortization | 10,548 | 8,165 | ||||||
| Stock-based compensation | 2,069 | 2,550 | ||||||
| Acquisition and realignment costs (2) | 2,675 | 1,176 | ||||||
| Restructuring charges (3) | — | 302 | ||||||
| Adjusted EBITDA | $ | 10,299 | $ | 8,163 | ||||
| (1) | Other (income) expense principally includes the change in fair value of our derivative financial instruments of approximately ($5.9) million and ($1.0) million for the three months ended March 31, 2016 and 2015, respectively, and interest expense associated with our debt. Management does not consider these costs to be indicative of our core operating results. |
| (2) | Acquisition and realignment costs include such items, when applicable, as (a) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (b) legal, accounting and other professional fees directly attributable to acquisition activity, (c) employee severance payments and third party professional fees directly attributable to acquisition or corporate realignment activities and (d) legal settlements or reserves for legal settlements in the period that pertain to historical matters that existed at acquired companies prior to their purchase date. Management does not consider these costs to be indicative of our core operating results. |
| (3) | Includes restructuring expenses pursuant to our integration plan announced on September 23, 2014. Management does not consider these costs to be indicative of our core operating results. |
| GLOBAL EAGLE ENTERTAINMENT |
Global Eagle Entertainment Inc.
Revenue, Contribution Margin, and Adjusted EBITDA
(In millions)
(Unaudited)
| Q1’16 | Q1’15 | % Change | ||||||||||
| Revenue | ||||||||||||
| Connectivity: | ||||||||||||
| Licensing and Services (1) | $ | 24.2 | $ | 22.2 | 9 | % | ||||||
| Equipment (2) | 6.0 | 6.5 | (6 | )% | ||||||||
| Total Connectivity Revenue | 30.2 | 28.6 | 6 | % | ||||||||
| Content: | ||||||||||||
| Licensing and Services (3)(4) | 83.6 | 71.7 | 17 | % | ||||||||
| Total Content Revenue | 83.6 | 71.7 | 17 | % | ||||||||
| Total Revenue | $ | 113.8 | $ | 100.3 | 13 | % | ||||||
| Cost of Sales | ||||||||||||
| Connectivity | 21.1 | 19.4 | 9 | % | ||||||||
| Content | 55.6 | 50.0 | 11 | % | ||||||||
| Total Cost of Sales | 76.7 | 69.4 | 11 | % | ||||||||
| Contribution Profit | ||||||||||||
| Connectivity | 9.1 | 9.2 | (1 | )% | ||||||||
| Content | 28.0 | 21.7 | 29 | % | ||||||||
| Total Contribution Profit | 37.1 | 30.9 | 20 | % | ||||||||
| Contribution Margin (%) | ||||||||||||
| Connectivity | 30 | % | 32 | % | (2 | )% | ||||||
| Content | 33 | % | 30 | % | 3 | % | ||||||
| Total Contribution Margin | 33 | % | 31 | % | 2 | % | ||||||
| Adjusted EBITDA* | $ | 10.3 | $ | 8.2 | 26 | % | ||||||
| (1) | Represents Wi-Fi, TV, VOD, music, shopping and travel-related revenue sold through our Connectivity platform, and to lesser extent from operations data solutions. |
| (2) | Represents sales of satellite based connectivity equipment, and to lesser extent from the sales of electronic flight bag equipment. |
| (3) | Represents revenue principally generated through the sale or license of media content, video and music programming, applications, and video games to customers. |
| (4) | Content services revenue includes various services generally billed on a time and materials basis such as encoding, quality assurance and editing of media content and related services. |
| GLOBAL EAGLE ENTERTAINMENT |
Global Eagle Entertainment Inc.
Segment Revenue and Contribution Profit
(In thousands)
(Unaudited)
Segment revenue, expenses and contribution profit for the three month periods ended March 31, 2016 and 2015 derived from the Company’s Connectivity and Content segments were as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||
| 2016 | 2015 | |||||||||||||||||||||||
| Content | Connectivity | Consolidated | Content | Connectivity | Consolidated | |||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||
| Licensing and Services | $ | 83,606 | $ | 24,225 | $ | 107,831 | $ | 71,650 | $ | 22,200 | $ | 93,850 | ||||||||||||
| Equipment | 5,986 | 5,986 | — | 6,455 | 6,455 | |||||||||||||||||||
| Total Revenue | 83,606 | 30,211 | 113,817 | 71,650 | 28,655 | 100,305 | ||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Cost of Sales | ||||||||||||||||||||||||
| Licensing and Services | 55,637 | 15,757 | 71,394 | 50,002 | 13,698 | 63,700 | ||||||||||||||||||
| Equipment | 5,374 | 5,374 | — | 5,726 | 5,726 | |||||||||||||||||||
| Total Cost of Sales | 55,637 | 21,131 | 76,768 | 50,002 | 19,424 | 69,426 | ||||||||||||||||||
| Contribution Profit | 27,969 | 9,080 | 37,049 | 21,648 | 9,231 | 30,879 | ||||||||||||||||||
| Other Operating Expenses | 42,042 | 34,909 | ||||||||||||||||||||||
| Loss from Operations | $ | (4,993 | ) | $ | (4,030 | ) | ||||||||||||||||||
Exhibit 99.2
| GLOBAL EAGLE ENTERTAINMENT |
Global Eagle Entertainment Agrees to Acquire Emerging Markets Communications
Transaction valued at $550 Million
Creates a leading provider of satellite-based communications and media content to rapidly growing mobility markets
Combined company expected to generate pro forma revenue of $660-690 million in 2016
Annual synergies expected to reach $40 million
LOS ANGELES, May 9, 2016 -- Global Eagle Entertainment Inc. (NASDAQ: ENT) (“GEE”) today announced that it has signed a definitive agreement to acquire Emerging Markets Communications (“EMC”), a leading communications services provider to maritime and other mobility markets. The combined company will become a leading provider of global satellite-based communications and media content serving the rapidly growing aviation and maritime markets and select land-based markets. For additional details, please visit GEE’s transaction microsite at GEE-EMC.mobi.
Under the agreement, GEE will pay $550 million for EMC. EMC shareholders will receive $30 million in cash and 6.6 million shares of GEE stock at closing and another $25 million in 2017, which may be paid in cash or stock at GEE’s election. As a result of this transaction, ABRY Partners (“ABRY”), an experienced communications-focused private equity investment firm and the majority owner of EMC, will acquire an equity position in GEE as well as the right to nominate a member to GEE’s Board of Directors. Dave Davis, Chief Executive Officer of GEE, will be CEO of the combined company and Abel Avellan, Founder and Chief Executive Officer of EMC, is expected to serve as GEE's President and Chief Strategy Officer.
The combined company is expected to benefit from:
| · | An expanded addressable market and growth opportunities; |
| · | Unparalleled global infrastructure to support customer needs; |
| · | A diversified and balanced revenue mix; and |
| · | Significant network and operational efficiencies. |
“This is a transformative acquisition for GEE that significantly expands our addressable market and accelerates our growth opportunities,” said Davis. “EMC’s verticals collectively represent a multi-billion dollar market opportunity with most growing at an annual rate of approximately 15%. Moving into a highly complementary, adjacent market like maritime leverages our existing infrastructure and suppliers to achieve improved efficiencies and cost savings, and provides valuable cross-selling opportunities for our content, digital media and operations solutions products. We believe the synergies available through this combination position us well to grow market share, expand our margins, and improve our returns in the years ahead.”
| Page 1 of 6 |
| GLOBAL EAGLE ENTERTAINMENT |
“We are excited to join forces with GEE to create a fast-growing and innovative provider of global mobility connectivity and content services,” said Avellan. “When the transaction closes, GEE will have a broad, diversified revenue base consisting of more than 400 customers around the world. Our combined scale, product breadth, and superior technology will enable us to deliver solutions that are unparalleled in the market today. Whether by sea, air or land, the expectation for access to a superior Internet connection and engaging on-board content is constantly increasing and will continue to drive strong demand for our expanded portfolio of products and services.”
EMC is projected to reach $190-200 million in 2016 revenue and $55-65 million in Adjusted EBITDA in 2016. GEE projects annual synergies of at least $40 million resulting from removing overlap in existing network infrastructure, reduced bandwidth costs, lower development expenses and integrating internal operations. GEE expects to achieve annual synergies of approximately $15 million in 2017 and reach $40 million run-rate by 2019. Costs to achieve the synergies are expected to range from $4 to $5 million over the next 18-24 months.
Serving All Major Mobility Verticals
Founded in 2000, EMC is a leading provider of connectivity solutions globally on both land and sea, with 75% of its revenue derived from maritime-based activities. EMC serves more than 200 customers in over 140 countries and delivers connectivity and content services to all key maritime markets, including cruise lines and ferries, yachts, commercial shipping and energy. Its land-based markets primarily consist of providing mission critical connectivity services for remote offices and sites of non-government organizations (“NGOs”) and fully manage services for wireless operators and carriers in underserved regions around the world.
Following the acquisition of EMC, GEE’s global satellite-based connectivity platform will service more than 700 planes, 1,600 vessels, 100,000 cruise ship cabins, and several thousand land-based sites, creating a leading provider of connectivity and media content to better serve customers in rapidly growing mobility markets. Both companies have a well-established track record of driving growth through new customer acquisitions and very high contract renewal rates. In addition, GEE and EMC have jointly provided media content to the maritime market for a number of years.
Additional Details
The transaction is subject to customary regulatory approvals and closing conditions and is expected to close in the third quarter of 2016.
| Page 2 of 6 |
| GLOBAL EAGLE ENTERTAINMENT |
GEE was advised by Citi and the law firm of Winston & Strawn LLP. EMC and ABRY were advised by Macquarie Capital and the law firms of DLA Piper and Kirkland & Ellis.
Conference Call and Webcast
In conjunction with this release, GEE will host a webcast to discuss the transaction and its first quarter 2016 results on Monday, May 9, 2016 at 8:00 a.m. ET (5:00 a.m. PT). The webcast will be available on the investor relations portion of the Company's Web site located at http://investors.geemedia.com/events.cfm. If you cannot listen to the webcast at its scheduled time, there will be a webcast replay archived on the Global Eagle website for 30 days.
About Global Eagle
Global Eagle Entertainment Inc. (NASDAQ: ENT) is a worldwide provider of aircraft connectivity systems, operations solutions and media content to the travel and mobility markets. Through the industry’s most comprehensive product and services platform, Global Eagle Entertainment provides airlines with a wide range of in-flight solutions. These include Wi-Fi, movies, television, music, interactive software, as well as portable IFE solutions, content management services, e-commerce solutions and original content development. Serving more than 200 airlines worldwide, Global Eagle Entertainment delivers exceptional quality and value to its customers to help them achieve their passenger experience objectives. The company’s headquarters are located in Los Angeles, California, with offices and teams located in North America, Asia, the Middle East, Europe, Africa, Oceania and South America. Find out more at: www.geemedia.com Find out more about the transaction at: www.GEE-EMC.mobi.
About EMC
EMC specializes in mission-critical communications and content for organizations and people on the move in the most remote locations. At sea, on land and in the air, the company provides seamless, reliable connectivity and access. EMC leverages its wholly-owned and operated satellite-terrestrial-cellular broadband network with fully meshed Multiprotocol Label Switching (MPLS) interconnected teleports. The company delivers mission-critical communications, Internet, live TV, on-demand video, voice, cellular and 3G/LTE services worldwide. EMC operates in 140 countries and runs 52 global field support centers. The established EMC team, in business for 35 years with unprecedented infrastructure and 20+ patented technologies, delivers industry firsts time and again. EMC hires and trains its own field engineers to flexibly deploy support quickly around the world. The company tailors its services for the most demanding users of mission-critical applications for the following sectors — energy; cruise and ferries; yachts; commercial shipping; mobile network operators; government; The United Nations (UN) and non-governmental organizations (NGOs); and global enterprises. For more information, visit www.EMCConnected.com.
| Page 3 of 6 |
| GLOBAL EAGLE ENTERTAINMENT |
Definition of Adjusted EBITDA
To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP, we present Adjusted EBITDA, which is a non-GAAP financial measure, as a measure of our performance. The presentation of Adjusted EBITDA is not intended to be considered in isolation from, or as a substitute for, or superior to, net income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of our cash flow or liquidity. For more information on this non-GAAP financial measure, please see the table entitled “Reconciliation of Non-GAAP Measure to GAAP Measure” at the end of this release.
Adjusted EBITDA is the primary measure used by our management and board of directors to understand and evaluate our financial performance and operating trends, including period to period comparisons, to prepare and approve our annual budget and to develop short and long term operational plans. Additionally, Adjusted EBITDA is the primary measure used by the compensation committee of our board of directors to establish the funding targets for and fund the annual bonus pool for our employees and executives. We believe our presentation of Adjusted EBITDA is useful to investors both because it allows for greater transparency with respect to key metrics used by management in its financial and operational decision-making and our management frequently uses it in discussions with investors, commercial bankers, securities analysts and other users of our financial statements.
We define Adjusted EBITDA as net income (loss) attributable to common stockholders before, when applicable, net income (loss) attributable to non-controlling interests, income tax expense (benefit), other (income) expense, depreciation and amortization, as further adjusted to eliminate the impact of, when applicable, stock-based compensation, acquisition and realignment costs, restructuring charges, F/X gain (loss) on intercompany loans and any gains or losses on certain asset sales or dispositions. Other income (expense), acquisition and realignment costs and restructuring charges include such items, when applicable, as (a) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (b) legal, accounting and other professional fees directly attributable to acquisition activity, (c) employee severance payments and third party professional fees directly attributable to acquisition or corporate realignment activities, (d) certain non-recurring expenses associated with our expansion into China that did not generate associated revenue in 2014, (e) legal settlements or reserves for legal settlements in the period that pertain to historical matters that existed at acquired companies prior to their purchase date, (f)non-cash impairment of a portion of certain receivables directly attributable to a customer undergoing economic hardships from trade sanctions imposed by the European Union and the United States on Russia, (g) changes in the fair value of our derivative financial instruments, (h) interest expense associated with our debt and (i) any restructuring charges in the period pursuant to our integration plan announced on September 23, 2014. Management does not consider these costs to be indicative of our core operating results.
| Page 4 of 6 |
| GLOBAL EAGLE ENTERTAINMENT |
EMC Adjusted EBITDA is defined as the consolidated net income (loss) of EMC plus (i) total interest expense, (ii) amortization of financing fees, (iii) provision (benefit) for taxes based on income, profits or capital gains, (iv) depreciation and amortization, (v) unusual or non-recurring charges, expenses or losses, (vi) non-cash charges, expenses or losses including any non-cash expense related to the accretion of preferred stock or vesting of warrants, (vii) retention and severance expenses, (viii) any restructuring costs, integration costs, transition costs, or costs incurred in non-recurring strategic initiatives, (ix) other accruals and amortization thereof, (x) proceeds of business interruption insurance, (xi) any non-cash increase in expenses resulting from the revaluation of inventory or due to purchase accounting, (xi) letter of credit fees, (xii) the amount of management fees or sponsor reimbursement expenses, (xiii) any equity funded employee plan costs, (xiv) any net loss from discontinued operations, (xv) EMC’s proportional share of Wireless Maritime Services’ EBITDA for the same period and (xvi) any non-cash loss related to foreign currency translation that were not included in consolidated net income.
With respect to projected full year 2016 Adjusted EBITDA, we are unable to prepare a quantitative reconciliation without unreasonable effort, and we are unable to address the probable significance of the unavailable information.
Cautionary Note Concerning Forward-Looking Statements
We make forward-looking statements in this release within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including, without limitation, the pending acquisition of EMC and the timing of the closing thereof, our ability to successful integrate EMC and achieve synergies therefrom, the expected performance of the combined GEE-EMC businesses, EMC’s projected revenue and Adjusted EBITDA, our revenues, expenses or other future financial or business performance or strategies. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions. These forward-looking statements are based on information available to us as of the date they were made, and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include: our ability to obtain necessary regulatory approvals or to satisfy any of the other conditions to the transaction on a timely basis or at all; a delay in the expected closing date of the transaction; a failure to close the transaction on the terms negotiated; any delay or inability of the combined company to realize the expected benefits and synergies of the transaction; our assumption of EMC’s outstanding indebtedness and the costs relating thereto; our issuance of stock to consummate the transaction and the dilution to our existing stockholders relating thereto; the loss of management and other key employees; substantial non-recurring transaction, regulatory and integration costs and/or unknown liabilities; sales of our stock in the future by shareholders of EMC, which will hold a substantial portion of our outstanding securities, and the resulting effect on the price of our common stock; the risk that disruptions from the proposed transaction will harm our or EMC’s business, including customer retention risk; competitive responses to the proposed transaction; our ability to effectively protect EMC’s intellectual property rights; the execution and compliance costs relating to new regulatory and compliance frameworks , new market risks and operations in new geographies; and general economic and business conditions that affect the combined company following the transaction. A detailed discussion of risks related to GEE’s business is included in the section entitled "Risk Factors" and other risks and uncertainties set forth in this release and in our most recent Annual Report on Form 10-K and subsequently filed reports on Form 10-Q.
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| GLOBAL EAGLE ENTERTAINMENT |
Investor Contact:
Kevin Trosian
Senior Vice President, Corporate Development and Investor Relations
+1 310-740-8624
Media Contact:
Jenelle Benoit
Director, Marketing & Communications
+1 310-321-6612
| Page 6 of 6 |
Exhibit 99.3
Q1 2016 Earnings & Transformative Acquisition of EMC May 9, 2016
Page 2 We make forward - looking statements in this presentation within the meaning of the Private Securities Litigation Reform Act of 1995 . These forward - looking statements relate to expectations or forecasts for future events, including, without limitation, the pending acquisition of Emerging Markets Communications (“EMC”) and the timing of the closing thereof, our ability to successfully integrate EMC and achieve synergies therefrom, the expected performance of the combined GEE - EMC business, EMC’s projected revenue and Adjusted EBITDA, our earnings, Adjusted EBITDA, revenues, expenses, capital expenditures, aircraft connectivity installations or other future financial or business performance or strategies, or the impact of legal or regulatory matters on our business, results of operations or financial condition . These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions . These forward - looking statements are based on information available to us as of the date they were made, and involve a number of risks and uncertainties which may cause them to turn out to be wrong . Accordingly, forward - looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward - looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws . As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward - looking statements . Some factors that could cause actual results to differ include : our ability to integrate our acquired businesses, the ability of the combined business to grow, including through acquisitions which we are able to successfully integrate, and the ability of our executive officers to manage growth profitably ; the ability of our customer Southwest Airlines to maintain a sponsor for its “TV Flies Free” offering and our ability to replicate this model through other sponsorship alliances ; the outcome of any legal proceedings pending or that may be instituted against us, our subsidiaries, or third parties to whom we owe indemnification obligations ; changes in laws or regulations that apply to us or our industry ; our ability to recognize and timely implement future technologies in the satellite connectivity space, including GSM and Ka - band system development and deployment ; our ability to capitalize on investments in developing our service offerings, including our long - term project with QEST to develop global antenna technologies ; significant product development expenses associated with our long - term line - fit initiatives ; our ability to deliver end - to - end network performance sufficient to meet increasing airline customer and passenger demand ; our ability to obtain regulatory approval on a timely basis for the use of our equipment on aircraft ; our ability to obtain and maintain international authorizations to operate our service over the airspace of foreign jurisdictions our customers utilize ; our ability to expand our service offerings and deliver on our service roadmap ; our ability to timely and cost - effectively identify and license television and media content that passengers will purchase ; a decrease in the media content onboard IFE systems and/or the discontinuance of the use of IFE systems indefinitely due to the emergence and increase in the use of hand - held personal devices by airline passengers ; general economic and technological circumstances in the satellite transponder market, including access to transponder space in capacity limited regions and successful launch of replacement transponder capacity where applicable ; our ability to obtain and maintain licenses for content used on legacy installed IFE systems ; the loss of, or failure to realize benefits from, agreements with our airline partners ; the loss of relationships with original equipment manufacturers or dealers ; unfavorable economic conditions in the airline industry and economy as a whole ; our ability to expand our domestic or international operations, including our ability to grow our business with current and potential future airline partners or successfully partner with satellite service providers, including Hughes Network Systems and SES ; our reliance on third - party satellite service providers and equipment and other suppliers, including single source providers and suppliers ; the effects of service interruptions or delays, technology failures, material defects or errors in our software, damage to our equipment or geopolitical restrictions ; the result of ongoing tax audit that could result in reduction of tax carryforwards ; the limited operating history of our connectivity and in - flight television and media products ; costs associated with defending pending or future intellectual property infringement actions and other litigation or claims ; increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with the roll out of our technology roadmap or our international plan of expansion ; fluctuation in our operating results ; the demand for in - flight broadband Internet access services and market acceptance for our products and services ; our ability to generate sufficient cash flow to make payments on our indebtedness ; our incurrence of additional indebtedness in the future ; our ability to repay the convertible notes at maturing or to repurchase the convertible nets upon a fundamental chance or at specific repurchase dates ; the effect of the conditional conversion feature of the convertible notes ; our compliance with the covenants in our Credit Agreement ; our ability to obtain necessary regulatory approvals or to satisfy any of the other conditions to the EMC transaction on a timely basis or at all ; a delay in the expected closing date of the EMC transaction ; a failure to close the EMC transaction on the terms negotiated ; any delay or inability of the combined company to realize the expected benefits and synergies of the transaction ; our assumption of EMC’s outstanding indebtedness and the costs relating thereto ; our issuance of stock to consummate the EMC transaction and the dilution to our existing stockholders relating thereto ; the loss of management and other key employees ; substantial non - recurring transaction, regulatory and integration costs and/or unknown liabilities ; sales of our stock in the future by shareholders of EMC, which will hold a substantial portion of our outstanding securities, and the resulting effect on the price of our common stock ; the risk that disruptions from the proposed transaction will harm our or EMC’s business, including customer retention risk ; competitive responses to the proposed EMC transaction ; our ability to effectively protect EMC’s intellectual property rights ; the execution and compliance costs relating to new regulatory and compliance frameworks, new market risks and operations in new geographies ; and general economic and business conditions that affect the combined company following the transaction . A detailed discussion of risks related to GEE’s business is included in the section entitled “Risk Factors” and other risks and uncertainties set forth in our most recent Annual Report on Form 10 - K and subsequently filed reports on Form 10 - Q . SAFE HARBOR STATEMENT
Page 3 Call Participants Agenda Dave Davis Chief Executive Officer, GEE Mike Zemetra Chief Financial Officer, GEE Walé Adepoju Chief Commercial Officer, GEE Kevin Trosian SVP Corporate Development & IR, GEE Abel Avellan Founder & Chief Executive Officer, EMC 1. Q1 2016 earnings 2. Transaction snapshot 3. About GEE & EMC 4. Strategic rationale 5. Transaction details AGENDA AND PARTICIPANTS More information at: www.gee - emc.mobi
Page 4 FINANCIAL OVERVIEW • Solid financial results and business execution for Q1 2016 • Record 1Q16 revenue of $113.8 m illion ▪ Year - over - Year growth of 13.5% • 1Q16 Adjusted EBITDA * of $10.3 million ▪ Year - over - Year growth of 26.2% * See Appendix A and Appendix B for the definition of Adjusted EBITDA and a reconciliation to Net Income
Page 5 FINANCIAL OVERVIEW • Secured over 95% of Content revenue up for renewal in 2016 ▪ Won a major contract with one of the world’s best - known airlines ▪ Entered new 5 - year agreement with one of our top 5 customers • Commenced service on flydubai ▪ Fully integrated portfolio of products • Operations solutions growing well ▪ Won 9 new customers
Page 6 NEXT GENERATION WIRELESS IFE : ENTICE Features up to 10,000 hours of movie and TV content streamed to passengers’ own devices, as well as music and games. Enables passengers to browse and binge - watch their favorite content with a personalized user interface and intelligent recommendation technology. Bundles hardware, software, content and services into a monthly recurring charge (MRC) per aircraft.
Page 7 GEE TO PROVIDE KA - BAND CONNECTIVITY SERVICES Airconnect Global Ku, Ku HTS, Ka maximizes flexibility Improved Customer Experience Open Architecture Provides Bandwidth Agnostic Solution Rapid Time to Market & Scalability
Page 8 CONSOLIDATED FINANCIALS • Q1 Revenue was $113.8 million, up 13.5% YoY • Q1 Contribution Profit was $37.0 million, up $6.1 million or 19.7% YoY • Q1 Adjusted EBITDA* reached $10.3 million, up 26.2% YoY * See Appendix A and Appendix B for the definition of Adjusted EBITDA and a reconciliation to Net Income Dollars in Millions Dollars in Millions
Page 9 FINANCIAL GUIDANCE** Guidance remains unchanged from original forecast • 2016 Full Year Revenue of $470 - $490 million • 2016 Full Year Adjusted EBITDA* of $57 - $65 million • 2016 Full Year CapEx range from $25 to $30 million • Installation backlog of approximately 200 aircraft to be installed over the next two years * See Appendix A and Appendix B for the definition of Adjusted EBITDA and a reconciliation to Net Income ** Financial guidance is as of May 3, 2015. The financial guidance by management was based on the economic environment as of such date. Actual results may differ materially. No reference (oral or written) to such guidance should be construed as an update, revision, confirmation or clarification of same.
Page 10 Fast and Reliable Connectivity Premium Media Solutions TRANSACTION OVERVIEW Leading provider of global satellite - based communications and media content to rapidly expanding mobility markets Transaction Summary • Acquisition of EMC for $550 million • 5.5x EMC 2016E Adj . EBITDA*, including $40 million of annual run - rate cost synergies • Expected close in Q3 2016 + * EMC Adjusted EBITDA is a non - GAAP financial measure. See Appendix A for the definition of EMC Adjusted EBITDA.
Page 11 TRANSFORMING THE MEDIA AND CONNECTIVITY EXPERIENCE IN THE AIR, AT SEA AND IN THE WORLD’S HARDEST TO REACH PLACES Will revolutionize the maritime experience for passengers and crew Leverages GEE’s core capabilities in content and technology with EMC’s customer base and network Favorable economies of scale in media purchasing, processing, portal development, and advertising
Page 12 • One of the largest providers of connectivity solutions for Cruise, Ferries, Yachts, NGO, & Cellular Backhaul end markets • 75% of revenue is maritime - based • Available market of 158,000 cruise cabins, 7,500 yachts and 130,000 ships • 450+ employees worldwide Aviation content & connectivity leader Network services for maritime & mobility • Leading global, full - service platform providing Content to ~200 airlines and Connectivity to 700+ aircraft • Integrated product suite – Content Services – Connectivity Systems – Digital Media Solutions – Operations Solutions • 1,000+ employees worldwide GEE & EMC OVERVIEW
Page 13 Expands addressable market and unlocks growth opportunities Drives significant network and operational efficiencies Establishes unparalleled infrastructure to support global customer needs Creates leading global satellite - based communications and media platform for rapidly expanding mobility markets Diversifies and balances revenue mix STRATEGIC RATIONALE
Page 14 GEE’s capabilities… …enhanced by EMC Network Infrastructure • Global satellite network and ground infrastructure • Scale efficiencies • 21 global teleports Media Solutions • Deep studio relationships • Exclusive content rights • Technical post production • Automation • Broadens distribution platform • Access to 158,000 cruise cabins and 130,000 ships Engineering and R&D • Aircraft STCs; Linefit programs • Antenna development • Key strategic partnerships • Proprietary compression and bandwidth optimization technologies • Maritime tech expertise Global Footprint • Operations across 6 continents • 52 global support centers • Supports mission - critical and crew welfare activities COMPELLING STRATEGIC FIT
Page 15 EXPANDED MARKET OPPORTUNITY Source: industry and company estimates. Addressable Customer Base Core Capabilities Customer Markets Commercial Aviation Cruise Yachts UN / NGO Telco Business Jet 20,000 Aircraft 158,000 Cabins 130,000 Ships 7,500 Yachts Remote Telcos Humanitarian campaigns Content Films and TV Shows Live TV Video - on - Demand Other (Games, Apps, etc.) Connectivity Broadband Internet Compression/Bandwidth Optimization Cellular Voice / Data Remote Backhaul Mission Critical Services Operational Data Additional Bandwidth Services Equipment CURRENT GEE PRO FORMA GEE 28,000 Aircraft Commercial Shipping/O&G
Page 16 *All charts are based on Pro Forma revenue estimates BROAD GLOBAL MOBILITY CUSTOMER BASE*
Page 17 Satellite Bandwidth Savings Teleport and Network Operations Internal Operations $15mm $40mm 2017 2019 Minimal Expense to Achieve Synergies Cost Synergy Realization OVER $40 MM OF ANNUAL RUN - RATE COST SYNERGIES* > *Expected, operating costs
Page 18 GEE Ku Network EMC Ku Network Ku Network Overlap EMC C - Band Coverage GLOBAL SATELLITE COVERAGE Coverage overlap presents significant cost savings opportunity
Page 19 Office Locations Support Centers Teleports 27 offices, 52 field centers and 31 teleports enhance mobility support WORLDWIDE INFRASTRUCTURE
Page 20 • In - flight connectivity • Media licensing • Content processing • Custom programming 2013 2014 2015 Established track record of successful integration and synergy realization • Completed nine acquisitions including merger of Row 44 and AIA • Successfully entered new market segments through M&A • Deep management experience with global integrations • Content solutions • International licensing • Advertising • Inflight games & apps • Operational data • Cloud analytics • Electronic flight bags POWERFUL HISTORY OF INTEGRATION SUCCESS Certain Assets from RMG Networks
Page 21 COMBINED FINANCIAL STRENGTH ($ in millions, unless otherwise noted) 2016E Revenue Revenue Mix 2016E PF Adj. EBITDA Customers GEE EMC NEW GEE = + $470 - 490MM $190 - $200MM $660 - 690MM 72% Content 28% Connectivity $57 - 65MM $55 - 65MM $112 - 130MM 200+ 200+ 400+ 5% Content 9 5% Connectivity 52 % Content 4 8 % Connectivity Addressable Market 50k Aircraft 1mm Vessels 1mm+ mobility platforms Excludes $40 million of run - rate synergies (1) See Appendix A for the definition of EMC Adjusted EBITDA , GEE Adjusted EBITDA and Pro Forma Adjusted EBITDA GEE’s revenue base is expected to increase by ~40% and Adj. EBITDA (1) is expected to approximately double (excluding synergies) • EMC 2016E forecast: Revenue $190 - 200 million / Adj. EBITDA (1) $55 - 65 million • Strong balance sheet with low projected net leverage ratios
Page 22 Synergies Governance & Management * Based on 21 day VWAP ending on 5/4/16 Transaction Overview • Acquisition of EMC for $550 million • Equates to a 5.5x multiple of EMC 2016E Adj. EBITDA inclusive of >$40 million expected annual run - rate cost synergies • Subject to customary regulatory approvals • Expected closing in Q3 2016 • >$40 million annual run - rate cost synergies • Significant cross selling opportunities identified • Tax attributes preliminarily valued at PV over $ 40 million • ABRY to have right to nominate board member • Dave Davis CEO • Following the closing, we expect Abel Avellan, EMC Founder & CEO, to be GEE President and Chief Strategy Officer TRANSACTION TERMS
Page 23 SUMMARY CAPITALIZATION (1) Deferred consideration can be settled in Cash or Stock at GEE's discretion. (2) Includes $40mm of expected annual run - rate cost synergies ; See Appendix A and Appendix B for the definition of Adjusted EBITDA and a reconciliation to Net Income ($ in millions, unless otherwise noted) Sources Amount % of Total Cash $83 15.2% Debt Financing 386 70.2 GEE Equity 56 10.1 Deferred Consideration 25 4.5 Total Sources $550 100.0% Uses Amount % of Total Acquisition of EMC $550 100.0% Total Uses $550 100.0% (1) (2) (2) Capitalization Table Pro Forma 6/30/2016 Cash $100 Debt Transaction Debt $386 Existing Debt 83 Total Debt $469 Total Net Debt $369 Credit Statistics Total Leverage / 2016E PF Adj. EBITDA 3.0x Total Net Leverage / 2016E PF Adj. EBITDA 2.4
Page 24 Diversifies existing revenue base into adjacent mobility verticals and balances revenue mix Combined scale creates enhanced purchasing power and reduces satellite capacity costs that improves product Attractive valuation and strong deleveraging profile Combination forms a leading provider of global satellite - based communications and media content to the mobility market Expands content/media addressable market in high growth mobility verticals KEY TAKEAWAYS
Page 25 Investor Contacts: Kevin Trosian SVP, Corporate Development and Investor Relations Benjamin Goodman Director, Corporate Development and Investor Relations + 1 310 - 740 - 8624 [email protected] FURTHER QUESTIONS
Appendix
Page 27 AT&T CELLULAR ROAMING JOINT VENTURE EMC deal includes 49% ownership in AT&T joint - venture • A leader in global cellular roaming services to off - shore vessels • Highly significant penetration; 500+ roaming agreements in place • Annual cash dividend WMS provides off - shore cellular roaming services Make and receive cellular calls Appendix
Page 28 DEFINITION OF ADJUSTED EBITDA Appendix A Adjusted EBITDA To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles, or GAAP, we present Adjusted EBITDA, which is a non - GAAP financial measure, as a measure of our performance . The presentation of Adjusted EBITDA is not intended to be considered in isolation from, or as a substitute for, or superior to, net income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of our cash flows or liquidity . Adjusted EBITDA is one of the primary measures used by our management and board of directors to understand and evaluate our financial performance and operating trends, including period to period comparisons, to prepare and approve our annual budget and to develop short and long term operational plans . Additionally, Adjusted EBITDA is one of the primary measures used by the compensation committee of our board of directors to establish the funding targets for our annual bonus pool for our employees and executives . We believe our presentation of Adjusted EBITDA is useful to investors both because it allows for greater transparency with respect to key metrics used by management in its financial and operational decision - making and our management frequently uses it in discussions with investors, commercial bankers, securities analysts and other users of our financial statements . We define Adjusted EBITDA as net income (loss) attributable to common stockholders before, when applicable, net income (loss) attributable to non - controlling interests, income tax expense (benefit), other (income) expense, depreciation and amortization, as further adjusted to eliminate the impact of, when applicable, stock - based compensation, acquisition and realignment costs, restructuring charges, foreign exchange gain (loss) on intercompany loans and any gains or losses on certain asset sales or dispositions . Other income (expense), acquisition and realignment costs and restructuring charges include such items, when applicable, as (a) non - cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (b) legal, accounting and other professional fees directly attributable to acquisition activity, (c) employee severance payments and third party professional fees directly attributable to acquisition or corporate realignment activities, (d) certain non - recurring expenses associated with our expansion into China that did not generate associated revenue in 2014 , (e) legal settlements or reserves for legal settlements in the period that pertain to historical matters that existed at acquired companies prior to their purchase date, (f) non - cash impairment charge of a portion of certain receivables directly attributable to a customer undergoing economic hardships from trade sanctions imposed by the European Union and the United States on Russia in 2014 , (g) changes in the fair value of our derivative financial instruments, (h) interest expense associated with our debt and ( i ) any restructuring charges in the period pursuant to our integration plan announced on September 23 , 2014 . Management does not consider these costs to be indicative of our core operating results . EMC Adjusted EBITDA EMC Adjusted EBITDA is defined as the consolidated net income (loss) of EMC plus ( i ) total interest expense, (ii) amortization of financing fees, (iii) provision (benefit) for taxes based on income, profits or capital gains, (iv) depreciation and amortization, (v) unusual or non - recurring charges, expenses or losses, (vi) non - cash charges, expenses or losses including any non - cash expense related to the accretion of preferred stock or vesting of warrants, (vii) retention and severance expenses, (viii) any restructuring costs, integration costs, transition costs, or costs incurred in non - recurring strategic initiatives, (ix) other accruals and amortization thereof, (x) proceeds of business interruption insurance, (xi) any non - cash increase in expenses resulting from the revaluation of inventory or due to purchase accounting, (xi) letter of credit fees, (xii) the amount of management fees or sponsor reimbursement expenses, (xiii) any equity funded employee plan costs, (xiv) any net loss from discontinued operations, (xv) EMC’s proportional share of Wireless Maritime Services’ EBITDA for the same period and (xvi) any non - cash loss related to foreign currency translation that were not included in consolidated net income . Pro Forma Adjusted EBITDA Pro Forma 2016 Adjusted EBITDA represents our projected 2016 full year Adjusted EBITDA plus projected full year 2016 EMC Adjusted EBITDA, assuming the acquisition occurred on January 1 , 2016 , and excluding any projected annual run - rate cost synergies . Projections With respect to projected 2016 Adjusted EBITDA, EMC Adjusted EBITDA and Pro Forma Adjusted EBITDA we are unable to prepare a quantitative reconciliation without unreasonable effort, and we are unable to address the probable significance of the unavailable information .
Page 29 GEE ADJUSTED EBITDA RECONCILIATION ($MM) Appendix B 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Net Income (27.0) (13.1) (5.6) (69.2) (26.3) 12.0 (15.5) (25.0) (3.4) 13.0 (6.9) (4.8) (2.4) NI Attributable to Non - Controlling Interests - 0.1 0.2 - 0.2 - - - - - - - - Income Tax - 0.6 1.2 - 1.3 0.8 1.5 4.6 (0.7) 1.3 0.2 0.7 3.2 Other Income (Expense) 4.8 5.0 (1.7) 60.1 15.9 (20.3) 7.1 11.2 0.1 (13.8) 3.2 2.1 (5.7) Depreciation and Amortization 4.7 7.0 8.7 11.0 9.4 8.3 8.3 8.4 8.2 8.2 9.5 10.7 10.5 Stock - based Compensation 1.6 0.9 (0.6) 1.1 2.6 2.0 1.9 1.6 2.6 1.6 2.1 2.0 2.1 Acquisition and Realignment Costs 12.2 1.4 3.2 5.5 2.1 3.6 3.0 8.0 1.2 2.0 5.8 4.7 2.7 Restructuring Charges - - - - - - 2.6 1.6 0.3 - 0.1 0.1 - F/X Gain (Loss) on Intercompany Loan 1.4 (0.5) (0.8) - - - - - - - - - - Adjusted EBITDA $(0.5)* $1.2 $4.5 $8.6 $5.1 $6.5 $8.8 $10.4 $8.2 $12.2 $14.1 $15.5 $10.3
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